Paddy Deighan is a real estate investor, attorney and advocate. This blog is dedicated to providing useful information, tips and guidelines for all of your real estate needs.

Wednesday, July 31, 2013

Pluses and Minuses of the HAMP Loan Modification Program

The Home Affordable Modification Program (HAMP) has been something of a disappointment nearly from its inception. After loudly touting the program’s ability to help 4 million borrowers, the current administration was forced to concede it had barely helped a fraction of that number and some advocates and administrators in the program actually came right out and declared the program to be a failure. However, in recent months, there has been a lot of discussion about how HAMP is finally gaining momentum. Hundreds of thousands of borrowers are getting the loan modifications that they desperately need. There is another, untold aspect of the story however. The untold story is that many home owners are defaulting on the modified loans. Sometimes the default is literally just a few months after modification.

According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), of the roughly 1.2 million mortgage modifications made through HAMP since its inception in 2009, 306,000 have re-defaulted. This is a default rate on modification of over 25%. It is either good or bad..…it depends upon how you want to look at it.

Furthermore, homeowners who entered the HAMP program in 2009 are re-defaulting at a rate of 46 percent. This statistic seems to be very alarming. “The Treasury needs to research why so many borrowers are dropping out of the program,” said head of SIGTARP Christy Romero. Her agency’s report indicates that homeowners who received only small reductions in their loan payments or overall debt, were still underwater on their mortgages, or had subprime credit scores and high overall debt at the time of modification were most likely to default. As of the end of April of 2013, taxpayers had lost roughly $815 million on permanent HAMP modifications that had re-defaulted.OUCHHHHHHH The U.S. Treasury originally allocated $19.1 billion to HAMP and, so far, has spent $4.4 billion. HAMP was recently extended to 2015.